IPhone Game Bazaar Lets Jumping Doodles Stomp ‘Street Fighter’

Lima Sky's "Doodle Jump" iPhone games. The title, in which players guide a four-legged creature up an endless series of platforms, was the most-downloaded paid application in the U.S. in April and topped paid game rankings in January. Source: Lima Sky via Bloomberg

June 11 (Bloomberg) -- The runaway success of an iPhone
game created by two brothers on a laptop is pressuring video-game makers Square Enix Holdings Co. and Capcom Co. to reboot
their strategies and appeal to mainstream players.

New York-based Lima Sky struck gold with “Doodle Jump,” a
game downloaded 4.7 million times from Apple Inc.’s iTunes Store,
ranking No. 4 among the top 100 paid applications for the iPhone,
iPad and iPod Touch. The 99-cent game has more than 170,000
Facebook followers.

Making hit games for Apple’s mobile devices has proven
difficult for major Japanese publishers, which typically devote
millions of dollars, large creative teams and several years to
develop games. Square Enix has no entries in Apple’s top 100,
while Capcom’s 99-cent quiz game ranks 98th. Activision Blizzard
Inc., the world’s largest video-game publisher, has two.

“The success of Apple’s devices is the biggest source of
concern in our packaged-software business,” Haruhiro Tsujimoto,
president of Capcom, Japan’s fifth-largest game maker, said in
an interview.

“Demand for the iPhone has spread to the casual user
demographic, a trend likely to be amplified with iPad’s release,
making it a gaming platform in its own right and a market that
cannot be ignored.”

The top-selling paid application in the iTunes Store is the
99-cent “Angry Birds” by Rovio Mobile Ltd., a Helsinki-based
developer with 17 employees.

New IPhone

The iPhone and iPod Touch captured 5 percent, or about $500
million, of the U.S. video-game software market last year, a
five-fold increase from a year earlier, according to San
Francisco-based researcher Flurry. Application sales may exceed
the equivalent of $760 million this year, according to a report
by Tokyo-based researcher Enterbrain Inc.

The new iPhone going on sale later this month features a
higher-resolution screen, faster processor and more sensitive
motion-control mechanism, making it better for games.

The average price of an application on Apple’s platform is
$2.90, according to Scottsdale, Arizona-based In-Stat LLC. That
compares with about $60 for a PlayStation 3 or Xbox 360 game and
$35 for a Nintendo DS handheld game.

‘Doodle’ Brothers

Igor Pusenjak, 34, created “Doodle Jump” while teaching
part-time at Parsons The New School for Design in New York. His
brother, Marko, 32, handled programming on a laptop. They formed
Lima Sky in 2008 and released the game in April 2009.

The title, in which players guide a four-legged creature up
an endless series of platforms, was the most-downloaded paid
application in the U.S. in April and topped paid game rankings
in January, according to Utrecht, Netherlands-based market
researcher Distimo.

“We started working on the iPhone apps in our spare time -
- nights and weekends,” Igor Pusenjak said in an e-mail. His
two-man company has “practically no overhead and the ability to
quickly adjust to any changes in the marketplace.”

Activision, of Santa Monica, California, had 7,000
employees on Dec. 31. Capcom employs about 3,550 people and
Square Enix about 3,338.

‘Guitar Hero’ App

Activision ranked No. 2 in the iTunes chart with its $2.99
“Guitar Hero” and No. 38 with its $9.99 “Call of Duty: World
at War: Zombies II.” The company, which recorded $4.28 billion
in revenue last year, first developed the titles for the
PlayStation 3 and Xbox 360.

Major publishers need to focus on quality and “deeper game
play” to compete against smaller rivals, said Karthik Bala, who
heads Activision’s Vicarious Visions studio in Albany, New York.
The studio developed “Guitar Hero,” which was released for the
iPhone on June 8.

“Anybody with talent can jump in and start developing for
it and have a method of distribution to get it out there,” Bala
said. “There are titles that come out of nowhere and capture
attention.”

Square Enix, Japan’s second-biggest game publisher, has 22
titles for Apple devices. Its flagship “Final Fantasy” role-playing game sells for $8.99 in the iTunes Store.

The Tokyo-based company estimates that content for mobile
devices will generate 6.9 percent of revenue this fiscal year,
compared with more than half of sales coming from packaged
software for gaming consoles and PCs.

‘Paradigm Shift’

Square Enix in May forecast revenue will fall 17 percent to
160 billion yen ($1.7 billion) in the 12 months ending in March,
after releases of major titles bolstered earnings last fiscal
year.

“The days of selling things the traditional way are
numbered,” said Akihito Shoji, a senior general manager at
Taito Corp., a unit of Square Enix. “We are witnessing a
paradigm shift and it’s not difficult to imagine established
companies losing their competitive advantage overnight.”

Sales of content for mobile devices, including the iPhone
and iPad, will account for 4.2 percent of revenue at the Osaka-based company in the year ending March 2011, compared with 75
percent from consoles and handheld players, Capcom said in May.

“Fixed costs at the bigger publishers force them to price
their games higher, and they’re being undercut by smaller
developers,” said Saurabh Singh, a game software analyst for
CLSA Asia-Pacific Markets in Singapore.

“It used to be that only select companies could make
content for game consoles, but what Apple did was to transform
that market into a bazaar, which means anybody can get in.”